You can't go home again

NEW YORK (Money Magazine) -- Two years have passed since Hurricane Katrina smashed into New Orleans. And if you hang out downtown and don't look too closely, you might think that everything is back to normal.

The French Quarter, home to the city's famous jazz clubs and eateries, is thick with tourists, and the Ernest N. Morial Convention Center, the shelter of last resort for thousands of hot, hungry and hopeless hurricane survivors, again plays host to groups like the American Association of Law Libraries and the International Council of Shopping Centers.

The Pellissiers (from lower left, Jordan, Jason, Jared, Billie and Mark) outside the flagging business and the trailer they once called home.

More from Money Magazine

Correcting your credit report gets easier Cut your cooling costs by 30% or more After Obamacare's launch, a look ahead

Best Places to Live Current Issue Subscribe to Money

The Bottom Line Income and expenses for the Pellissiers in 2006. Income Amount Insurance payments $359,220 Mark's salary $57,000 Billie's salary $27,053 Other damage payments $19,468 Insurance living allowance $19,415 Withdrawal from savings $17,211 Rental income $3,600 TOTAL $502,967 Outgo Mortgage payoff (NO) $251,145 Renovation/repairs $102,968 Mortgage payoff (Ga.) $45,000 Food, groceries $25,800 Mortgage payments $18,638 Demolition (Lakeview) $16,282 Vehicle expenses $11,439 Utilities $8,449 Day care/tuition $7,700 Medical $4,259 Entertainment $3,140 Property taxes $2,686 Homeowners insurance $1,797 Income taxes $1,427 Student loan $1,237 Clothing/furniture $1,000 TOTAL $502,967

TalkBack Progress Report Do you think New Orleans could have been further along in its recovery post-Katrina? (more)

But to the east, off Interstate 90, in the city's hardest-hit neighborhoods, the landscape is still post-apocalyptic. On major arteries, practically everything is boarded up: shopping centers, supermarkets, Walgreens, Wendy's, even gas stations.

Whatever side street you turn into, the scene is pretty much the same: a couple of rebuilt houses framed by flowers and lawns, but also acres of empty lots, FEMA trailers, tumbledown dwellings and weeds that have grown nose-high in the damp Louisiana heat.

Mark Pellissier, 44, and his wife Billie, 41, who live on such a street, have had enough. This summer they are leaving New Orleans, where both were born and grew up, to move - regretfully - to Atlanta. (More photos of how the Pellissiers have coped.)

But they feel they have no choice. The storm sent Mark's business, the Radiator Shop of New Orleans, an automotive services company that has been in his family for three generations, into a death spiral, dropping its annual revenues from $550,000 pre-Katrina to about $125,000 last year.

They're fed up with the molasses-like pace of recovery; even now they can't get an ordinary phone line installed. And they're anxious about the increase in violent crime and its threat to their three boys, Jason, 16, Jared, 14, and Jordan, 5. Only a few months ago, a shooting occurred right on their block.

They are also reluctant to invest in a new house. "I don't think anyone can guarantee the levees," says Billie, a nurse. If another storm comes along, the city could flood again. "I'm just not that kind of gambler," she adds.

The Pellissiers have already piled up plenty of losses - for starters, their $350,000 three-bedroom house in Lakeview, a pricey neighborhood near Lake Pontchartrain. A rental house they own in East New Orleans (and now live in) also suffered floor-to-rafters damage.

Even though they had insurance on all their properties, payments fell about 30% short of their losses, not including their personal belongings.

In leaving, the family joins a diaspora of hundreds of thousands of Gulf Coast residents who now live in just about every state in the nation. Some evacuated and stayed where they landed. Others lacked the means to return.

Still others, like the Pellissiers, have grown discouraged.

According to the Katrina Index, a monthly report monitoring Gulf Coast rebuilding, New Orleans' population has dropped by 51 percent. The loss has been crippling. Such a sparse number of people spread randomly across a city makes it nearly impossible for neighborhood businesses to survive or for families to find viable communities in which to resettle.

By moving to Atlanta, the Pellissiers hope to recapture a normal life - one where supermarkets and hospitals are open, where kids can travel safely to school and where a house stands a chance of appreciating.

But they still face substantial challenges.

The biggest: figuring out what to do with the Radiator Shop and what Mark should do to earn a living in Atlanta if the decision is to sell.

Fairly free-spending before Katrina, the Pellissiers have little savings. Billie's 401(k) from an old job is worth a scant $20,000; Mark has about the same in a business retirement account; and they have put aside nothing for their children's college education.

Most difficult of all, perhaps, will be picking up a new life in a town where they don't know everybody. "Wherever you went here, there was always a connection," says Billie. "It's going to be hard to leave that."

Family has played a big role in shaping the Pellissiers' lives. Mark and Billie first met in a restaurant in 1988, but their families already knew each other. Her dad was a mechanic, and Mark's ran the Radiator Shop, a longtime fixture in the city.

"You look familiar," she said to him. "Are you Todd or Mark?" she asked, thinking of his brother. "I know who I am," he replied. "I thought he was a smart ass," she says.

Apparently not a problem. They married 18 months later. They had a lot going for them. Billie did drafting for a company that renovated oil refineries, while Mark managed the East New Orleans branch of the shop.

With the help of his parents, he'd already built a two-family house where the couple settled. As their own family expanded, they moved into Mark's grandmother's place after she left for a nursing home.

By 1999 the couple had saved enough to buy a three-bedroom 1930s bungalow to which they later added an apartment for Billie's mom. By that time Billie had earned a nursing degree from Louisiana State University and worked in intensive-care units.

Even when Katrina was a distant swirl over Florida, "it was clear we had to evacuate," says Billie. The authorities were ghoulishly warning those who stayed behind to write their Social Security numbers on their arms.

Mark didn't want to go. The previous year, the family had spent nine grueling hours in their car fleeing Hurricane Ivan, which turned east and fizzled out.

But when it became obvious that Katrina was drawing a bead on the city, the family packed enough clothes for a few days and drove to a friend's house in San Antonio.

They soon learned that Katrina had profoundly changed their lives. "We Googled our house," says Billie. "The water was up to our bedroom window."

The business was under six feet of water. "They were telling us that it would be two months before we could go back," says Mark.

Not wanting to overstay their welcome, they headed to Atlanta, where they moved in with Billie's brother. They purchased a small secondhand trailer for $11,500 - "not too different from the ones FEMA bought for $90,000," adds Mark with a grim laugh - and parked it in their host's driveway.

Leaving the kids behind, the couple returned to New Orleans about a month after the storm. Entering the city was an eerie experience - "like going from color TV to black and white," says Billie. "Everything was brown or gray. There were no sounds, no birds. And it smelled like death."

Small wonder. Some 700 people in New Orleans alone had perished. Every place they owned - their rental property, the business, their home - was a mess. They donned hazmat suits, shrimp boots and respirators to try to salvage some of their belongings.

But flood waters, which sat steaming for three weeks in the 95°F heat, had left everything covered in mold and muddy gunk. "When we saw the house, it was overwhelming, but I was proud of myself - I didn't cry." says Billie.

She did weep, though, when they saw homes and landmarks that she and Mark had grown up with gone forever.

It was all too much to take. They returned to Atlanta, figuring they would have to stay for a while. Impulsively, they bought a 4,000-square-foot house in suburban Woodstock. They had almost no funds or income, but on the strength of their credit score they landed a 30-year mortgage with a 7.25% interest rate that would cover 100% of the $225,000 purchase price.

At the closing, however, they realized that the deal was a dud. The low rate applied to only 80% of the loan. The rest was a second mortgage at 11.25%. No money was coming in beyond relief checks from FEMA, a total of about $4,400.

So Billie expedited approval of her Georgia nursing license and began taking shifts in Atlanta hospitals.

Each week Mark commuted 430 miles to New Orleans to work on the business and tackle insurance claims. With no place to stay, he took the trailer and parked it in front of the shop, where he found computers and his massive wood desk piled in a jumble, soaked and moldy.

All the equipment was a loss, and, he says, he and his employees "had to shovel our way in." The cleanup took two months.

Dealing with Travelers, his home insurer, was a much more frustrating chore. Mark spoke to 23 different adjusters, explaining the full story from scratch each time. In January 2006, Travelers sent a check for $12,000. A more substantial check for $200,000 took another 18 months to arrive. (A Travelers spokesman said that the unprecedented nature of Katrina led the insurer to use more than one adjuster in New Orleans but that it rarely used more than three.)

The only mercy shown them - a three-month moratorium on their New Orleans house payments from Countrywide - turned out to be less than compassionate (though it was typical of the payment relief offered to Katrina homeowners). At the end of three months, the lender insisted on getting three months' payment in a lump sum.

Jason, their oldest, meanwhile lobbied to return to New Orleans, to Benjamin Franklin, the elite public high school he had attended pre-Katrina, and his friends.

The kids had already lost all their stuff, and the couple felt that denying them familiar surroundings would compound the injustice.

So at Easter 2006, leaving their new house empty, the five Pellissiers returned to New Orleans and once again squished into the trailer.

A Georgia church group that came down to help gutted their rental property. In contrast to the government, "churches and ordinary people have been wonderful to us," says Billie.

After finishing the renovation, the Pellissiers moved into one unit and rented out the other for $1,400 a month. They also used some of their insurance payments to wipe out debts: first the 11.25% second mortgage on their Atlanta house, then an $8,000 credit-card balance.

Rebuilding their Lakeview house wasn't an option they'd consider, however, because the neighborhood is below sea level. So they had the house demolished and sold the lot, netting $91,000.

They thought of rebuilding elsewhere in New Orleans, but after searching through the Louisiana Almanac, couldn't find any affordable neighborhoods above sea level.

The federal government is encouraging homeowners to build on cement pilings, but as Mark and Billie point out on a drive around their neighborhood, the vista of uneven up-and-down houses is just plain ugly. Relocating to a suburb on the north side of Lake Pontchartrain, as many New Orleanians have, wasn't the answer either; Jason and Jared would no longer fulfill the residence requirement necessary to attend Benjamin Franklin.

The Pellissiers had hoped that New Orleans would be springing back to life when they returned after a six-month absence. But they haven't seen much progress.

The city has regained the dubious honor of murder capital of the U.S. Most schools are still dreadful.

And citizens have little faith that elected officials are competent to raise the city out of the muck. "Louisiana is famous for corrupt politicians," says Mark. "We've lived with it for a long time, but now we've had it."

Atlanta beckons with a house they own, good schools and ample work for Billie. "Everything points to Atlanta," she says. "Everything but Mark's business."

For his part, Mark says he is willing to keep commuting, but business has been so bad that he's had to lay off all but two employees. He estimates that only 18% of his customers have returned.

If he leaves the Radiator Shop behind, he'd like to get something out of his 23-year investment. But it's not clear how valuable the shop is. Mark's father still owns most of the land and buildings, while Mark's holdings include a $20,000 plot of land, the equipment, about $75,000 in cash from insurance payments and $20,000 in an investment account.

His future in Atlanta is anything but clear. He has thought of buying a franchise or starting a new business, but he's hanging back, unsure whether he wants the responsibility or stress.

"It's going to be hard starting over," he says.

To help Mark and Billie decide how to make a new start, Money Magazine consulted Deborah Butler, a career coach and assistant professor at the Robinson School of Business at Georgia State University in Atlanta, and Diane Decharles, a financial planner with the Pinnacle Asset Management Group in Shreveport, who counsels Katrina families.

Walk away from the business Without much in the way of profits, Mark's Radiator Shop won't attract buyers, says Decharles, but he can liquidate the equipment and, because the company is an S corporation, collect the $75,000 insurance settlement.

"You probably feel guilty about the business because it's been in the family for so long. But it's not your fault that things aren't going well; it's Katrina's fault," she says.

Go slow Mark's instinct not to rush into things is the right one, says Butler. Plunging into a new business in a strange city right away is risky. Instead, he should take an interim job in automotive services until he can figure out whether he can support himself in that field - or if it's really what he wants to do.

To help him activate his network of business contacts and focus on what he wants both short- and long-term, Butler recommends that he try a new self-assessment technique developed at the University of Michigan called the reflected best-self exercise.

First, Mark would e-mail between 10 and 30 people, including colleagues, vendors, relatives and friends, and ask each for stories about situations in which he added value. Doing that will help him recognize his strengths and use them to figure out what kind of work would suit him - and employers - best.

For more, visit the Center for Positive Organizational Leadership's Web site, where you can buy a booklet on the technique ($6).

Fund the kids' education With the profits from their Lakeview lot and what they should recoup from the business, the Pellissiers will have about $179,000 on hand.

Jason and Jared are just a few years away from college. Annual tuition for Georgia State is $12,450 today ($9,450 if the boys qualify for the state's merit-based HOPE Scholarships).

Decharles recommends that the Pellissiers immediately set aside $38,000 for Jason's schooling in a 529 plan and then funnel the roughly $2,500 a month they collect in rental income from the East New Orleans house into college savings plans for the other boys.

Get serious about retirement Billie plans to look for a permanent hospital job in Atlanta, and when she finds one, Decharles says, she should sign up for the retirement plan right away and invest the most she can in a target-date fund, which would put her in a readymade age-appropriate portfolio.

Mark should take about $50,000 from his cash and earmark that for retirement too. After the boys' educations are funded, rent money should go toward retirement.

MONEY caught up with the Pellissiers right after Billie and the boys moved to Atlanta. Mark was staying on in New Orleans until he closes his shop. Although he and Billie are sad to be leaving their lifelong home, they believe they're doing the right thing.

"Billie and I have been saying to each other that when you stay in New Orleans, you get used to it and you think, things aren't so bad," says Mark. "But now we see that everything could be so much better."